Compilation of the Social Security Laws

PENALTIES

(A) General
penalty.—If an audit conducted under
chapter 75 of title 31, United States Code[48], finds that
an amount paid to a State under section 403 for a fiscal year has been used in
violation of this part, the Secretary shall reduce the grant payable
to the State under section 403(a)(1) for the immediately succeeding
fiscal year quarter by the amount so used.

(B) Enhanced
penalty for intentional violations.—If
the State does not prove to the satisfaction of the Secretary that
the State did not intend to use the amount in violation of this part,
the Secretary shall further reduce the grant payable to the State
under section 403(a)(1) for the immediately succeeding fiscal year quarter by an amount
equal to 5 percent of the State family assistance grant.

(C) Penalty
for misuse of competitive welfare-to-work funds.—If the Secretary of Labor finds that an amount paid to an entity
under section 403(a)(5)(B) has been used in violation of subparagraph (B) or (C) of section 403(a)(5), the entity
shall remit to the Secretary of Labor an amount equal to the amount
so used.

(i) In general.—If the Secretary determines that a State has not, within 45
days after the end of a fiscal quarter, submitted the report required
by section 411(a) for the quarter, the Secretary shall reduce the grant payable to
the State under section 403(a)(1) for the immediately succeeding fiscal year by an
amount equal to 4 percent of the State family assistance grant.

(ii) Rescission
of penalty.—The Secretary shall rescind
a penalty imposed on a State under clause (i) with respect to a report
if the State submits the report before the end of the fiscal quarter
that immediately succeeds the fiscal quarter for which the report
was required.

(B) Report
on engagement in additional work activities and expenditures for other
benefits and services.—

(i) In general.—If the Secretary determines that a State has not submitted the
report required by section 411(c)(1)(A)(i) by May 31, 2011, or the report required by section 411(c)(1)(A)(ii) by August 31,
2011, the Secretary shall reduce the grant payable to the State under
section 403(a)(1) for the immediately
succeeding fiscal year by an amount equal to not more than 4 percent
of the State family assistance grant.

(ii) Rescission
of penalty.—The Secretary shall rescind
a penalty imposed on a State under clause (i) with respect to a report
required by section 411(c)(1)(A) if the State submits the report not later than—

(A) In
general.—If the Secretary determines
that a State to which a grant is made under section 403 for a fiscal year
has failed to comply with section 407(a) for the fiscal year, the Secretary
shall reduce the grant payable to the State under section 403(a)(1) for the
immediately succeeding fiscal year by an amount equal to the applicable
percentage of the State family assistance grant.

(B) Applicable
percentage defined.—As used in subparagraph
(A), the term “applicable percentage” means, with respect
to a State—

(i) if a penalty was
not imposed on the State under subparagraph (A) for the immediately
preceding fiscal year, 5 percent; or

(ii) if a penalty
was imposed on the State under subparagraph (A) for the immediately
preceding fiscal year, the lesser of—

(I) the percentage
by which the grant payable to the State under section 403(a)(1) was reduced
for such preceding fiscal year, increased by 2 percentage points;
or

(C) Penalty
based on severity of failure.—The Secretary
shall impose reductions under subparagraph (A) with respect to a fiscal
year based on the degree of noncompliance, and may reduce the penalty
if the noncompliance is due to circumstances that caused the State
to become a needy State (as defined in section 403(b)(5)[49]) during the fiscal year or if the noncompliance is due
to extraordinary circumstances such as a natural disaster or regional
recession. The Secretary shall provide a written report to Congress
to justify any waiver or penalty reduction due to such extraordinary
circumstances.

(4) Failure
to participate in the income and eligibility verification system.—If the Secretary determines that a State program funded under
this part is not participating during a fiscal year in the income
and eligibility verification system required by section 1137, the Secretary
shall reduce the grant payable to the State under section 403(a)(1) for the
immediately succeeding fiscal year by an amount equal to not more
than 2 percent of the State family assistance grant.

(5) Failure
to comply with paternity establishment and child support enforcement
requirements under part d.—Notwithstanding
any other provision of this Act, if the Secretary determines that
the State agency that administers a program funded under this part
does not enforce the penalties requested by the agency administering
part D against recipients of assistance under the State program who
fail to cooperate in establishing paternity or in establishing, modifying,
or enforcing a child support order in accordance with such part and
who do not qualify for any good cause or other exception established
by the State under section 454(29), the Secretary shall reduce the grant payable to the
State under section 403(a)(1) for the immediately succeeding fiscal year (without
regard to this section) by not more than 5 percent.

(6) Failure
to timely repay a federal loan fund for state welfare programs.—If the Secretary determines that a State has failed to repay
any amount borrowed from the Federal Loan Fund for State Welfare Programs
established under section 406 within the period of maturity applicable to the loan,
plus any interest owed on the loan, the Secretary shall reduce the
grant payable to the State under section 403(a)(1) for the immediately succeeding
fiscal year quarter (without regard to this section) by the outstanding
loan amount, plus the interest owed on the outstanding amount. The
Secretary shall not forgive any outstanding loan amount or interest
owed on the outstanding amount.

(7) Failure
of any state to maintain certain level of historic effort.—

(A) In
general.—The Secretary shall reduce the
grant payable to the State under section 403(a)(1) a fiscal year[50] by the amount (if any) by which qualified State expenditures
for the then immediately preceding fiscal year are less that the applicable
percentage of historic State expenditures with respect to such preceding
fiscal year.

(I) In general.—The term “qualified
State expenditures” means, with respect to a State and a fiscal
year, the total expenditures by the State during the fiscal year,
under all State programs, for any of the following with respect to
eligible families:

(aa) Cash assistance,
including any amount collected by the State as support pursuant to
a plan approved under part D, on behalf of a family receiving assistance
under the State program funded under this part, that is distributed
to the family under section 457(a)(1)(B) and disregarded in
determining the eligibility of the family for, and the amount of,
such assistance.

(cc) Educational
activities designed to increase self-sufficiency, job training, and
work, excluding any expenditure for public education in the State
except expenditures which involve the provision of services or assistance
to a member of an eligible family which is not generally available
to persons who are not members of an eligible family.

(dd) Administrative
costs in connection with the matters described in items (aa), (bb),
(cc), and (ee), but only to the extent that such costs do not exceed
15 percent of the total amount of qualified State expenditures for
the fiscal year.

(II) Exclusion of transfers from other state and local programs.—Such term does not include expenditures under any State or local
program during a fiscal year, except to the extent that—

(aa) the expenditures
exceed the amount expended under the State or local program in the
fiscal year most recently ending before the date of the enactment
of this section[51]; or

(bb) the State
is entitled to a payment under former section 403 (as in effect immediately before such
date of enactment) with respect to the expenditures.

(III) Exclusion of amounts expended to replace penalty grant reductions.—Such term does not include any amount expended in order to comply
with paragraph (12).

(IV) Eligible families.—As used in subclause
(I), the term “eligible families” means families eligible
for assistance under the State program funded under this part, families
that would be eligible for such assistance but for the application
of section 408(a)(7) of this Act, and families of aliens lawfully present in the United
States that would be eligible for such assistance but for the application
of title IV of the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996[52].

(V) Counting of spending on certain pro-family activities.—The term “qualified State expenditures” includes
the total expenditures by the State during the fiscal year under all
State programs for a purpose described in paragraph (3) or (4) of
section 401(a).

(iii) Historic
state expenditures.—The term “historic
State expenditures” means, with respect to a State, the lesser
of—

(I) the expenditures
by the State under parts A and F (as in effect during fiscal year
1994) for fiscal year 1994; or

(II) the amount
which bears the same ratio to the amount described in subclause (I)
as—

(aa) the State
family assistance grant, plus the total amount required to by paid
to the State under former section 403 for fiscal year 1994 with respect
to amounts expended by the State for child care under subsection (g)
or (i) of section 402 (as in effect during fiscal year 1994); bears to

(bb) the total
amount required to be paid to the State under former section 403 (as in effect during
fiscal year 1994) for fiscal year 1994.

Such term does not include any expenditures under the State
plan approved under part A (as so in effect) on behalf of individuals
covered by a tribal family assistance plan approved under section 412, as determined by
the Secretary.

(iv) Expenditures
by the state.—The term “expenditures
by the State” does not include—

(I) any expenditure
from amounts made available by the Federal Government;

(II) any State
funds expended for the medicaid program under title XIX;

(III) any
State funds which are used to match Federal funds provided under section 403(a)(5); or

(IV) any State
funds which are expended as a condition of receiving Federal funds
other than under this part.

Notwithstanding subclause (IV) of the preceding sentence, such
term includes expenditures by a State for child care in a fiscal year
to the extent that the total amount of the expenditures does not exceed
the amount of State expenditures in fiscal year 1994 or 1995 (whichever
is the greater) that equal the non-Federal share for the programs
described in section 418(a)(1)(A).

(v) Source
of data.—In determining expenditures
by a State for fiscal years 1994 and 1995, the Secretary shall use
information which was reported by the State on ACF Form 231 or (in
the case of expenditures under part F) ACF Form 331, available as
of the dates specified in clauses (ii) and (iii) of section 403(a)(1)(D).

(8) Noncompliance
of state child support enforcement program with requirements of part
d.—

(A) In
general.—If the Secretary finds, with
respect to a State’s program under part D, in a fiscal year
beginning on or after October 1, 1997—

(i)(I) on the basis
of data submitted by a State pursuant to section 454(15)(B), or on the basis of the results
of a review conducted under section 452(a)(4), that the State program failed
to achieve the paternity establishment percentages (as defined in
section 452(g)(2)), or to meet other performance measures that may be established
by the Secretary;

(II) on the
basis of the results of an audit or audits conducted under section 452(a)(4)(C)(i) that the State data submitted pursuant to section 454(15)(B) is incomplete or unreliable;
or

(III) on the
basis of the results of an audit or audits conducted under section 452(a)(4)(C) that
a State failed to substantially comply with 1 or more of the requirements
of part D (other than paragraph (24) or subparagraph (A) or (B)(i)
of paragraph (27), of section 454 and

(I) the State
failed to take sufficient corrective action to achieve the appropriate
performance levels or compliance as described in subparagraph (A)(i);
or

(II) the data
submitted by the State pursuant to section 454(15)(B) is incomplete or unreliable;
the amounts otherwise payable to the State under this part for quarters
following the end of such succeeding fiscal year, prior to quarters
following the end of the first quarter throughout which the State
program has achieved the paternity establishment percentages or other
performance measures as described in subparagraph (A)(i)(I), or is
in substantial compliance with 1 or more of the requirements of part
D as described in subparagraph (A)(i)(III), as appropriate, shall
be reduced by the percentage specified in subparagraph (B).

(ii) not less than
2 nor more than 3 percent, if the finding is the 2nd consecutive finding
made pursuant to subparagraph (A); or

(iii) not less than
3 nor more than 5 percent, if the finding is the 3rd or a subsequent
consecutive such finding.

(C) Disregard
of noncompliance which is of a technical nature.—For purposes of this section and section 452(a)(4), a State determined as a
result of an audit—

(i) to have failed
to have substantially complied with 1 or more of the requirements
of part D shall be determined to have achieved substantial compliance
only if the Secretary determines that the extent of the noncompliance
is of a technical nature which does not adversely affect the performance
of the State’s program under part D; or

(ii) to have submitted
incomplete or unreliable data pursuant to section 454(15)(B) shall be determined to
have submitted adequate data only if the Secretary determines that
the extent of the incompleteness or unreliability of the data is of
a technical nature which does not adversely affect the determination
of the level of the State’s paternity establishment percentages
(as defined under section 452(g)(2)) or other performance measures that may be established
by the Secretary.

(9) Failure
to comply with 5-year limit on assistance.—If the Secretary determines that a State has not complied with section 408(a)(7) during
a fiscal year, the Secretary shall reduce the grant payable to the
State under section 403(a)(1) for the immediately succeeding fiscal year by an
amount equal to 5 percent of the State family assistance grant.

(10) Failure
of state receiving amounts from contingency fund to maintain 100 percent
of historic effort.—If, at the end of
any fiscal year during which amounts from the Contingency Fund for
State Welfare Programs have been paid to a State, the Secretary finds
that the qualified State expenditures (as defined in paragraph (7)(B)(i)
(other than the expenditures described in subclause (I)(bb) of that
paragraph)) under the State program funded under this part for the
fiscal year are less than 100 percent of historic State expenditures
(as defined in paragraph (7)(B)(iii) of this subsection), excluding
any amount expended by the State for child care under subsection (g)
or (i) of section 402 (as in effect during fiscal year 1994) for fiscal year 1994, the
Secretary shall reduce the grant payable to the State under section 403(a)(1) for the
immediately succeeding fiscal year by the total of the amounts so
paid to the State that the State has not remitted under section 403(b)(6).

(11) Failure
to maintain assistance to adult single custodial parent who cannot
obtain child care for child under age 6.—

(A) In general.—If the Secretary determines
that a State to which a grant is made under section 403 for a fiscal year
has violated section 407(e)(2) during the fiscal year, the Secretary shall reduce
the grant payable to the State under section 403(a)(1) for the immediately succeeding
fiscal year by an amount equal to not more than 5 percent of the State
family assistance grant.

(B) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with
respect to a fiscal year based on the degree of noncompliance.

(12) Requirement
to expend additional state funds to replace grant reductions; penalty
for failure to do so.—If the grant payable
to a State under section 403(a)(1) for a fiscal year is reduced by reason of this
subsection, the State shall, during the immediately succeeding fiscal
year, expend under the State program funded under this part an amount
equal to the total amount of such reductions. If the State fails during
such succeeding fiscal year to make the expenditure required by the
preceding sentence from its own funds, the Secretary may reduce the
grant payable to the State under section 403(a)(1) for the fiscal year that
follows such succeeding fiscal year by an amount equal to the sum
of—

(13) Penalty
for failure of state to maintain historic effort during year in which
welfare-to-work grant is received.—If
a grant is made to a State under section 403(a)(5)(A) for a fiscal year and
paragraph (7) of this subsection requires the grant payable to the
State under section 403(a)(1) to be reduced for the immediately succeeding fiscal
year, then the Secretary shall reduce the grant payable to the State
under section 403(a)(1) for such succeeding fiscal year by the amount of the grant made
to the State under section 403(a)(5)(A) for the fiscal year.

(14) Penalty
for failure to reduce assistance for recipients refusing without good
cause to work.—

(A) In general.—If the Secretary determines
that a State to which a grant is made under section 403 in a fiscal year
has violated section 407(e) during the fiscal year, the Secretary shall reduce
the grant payable to the State under section 403(a)(1) for the immediately succeeding
fiscal year by an amount equal to not less than 1 percent and not
more than 5 percent of the State family assistance grant.

(B) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with
respect to a fiscal year based on the degree of noncompliance.

(15) Penalty
for failure to establish or comply with work participation verification
procedures.—

(A) In general.—If the Secretary determines
that a State to which a grant is made under section 403 in a fiscal year
has violated section 407(i)(2) during the fiscal year, the Secretary shall reduce
the grant payable to the State under section 403(a)(1) for the immediately succeeding
fiscal year by an amount equal to not less than 1 percent and not
more than 5 percent of the State family assistance grant.

(B) Penalty based on severity of failure.—The Secretary shall impose reductions under subparagraph (A) with
respect to a fiscal year based on the degree of noncompliance.

(A) In general.—If, within 2 years after
the date of the enactment of this paragraph, any State has not reported
to the Secretary on such State’s implementation of the policies
and practices required by section 408(a)(12), or the Secretary determines,
based on the information provided in State reports, that any State
has not implemented and maintained such policies and practices, the
Secretary shall reduce, by an amount equal to 5 percent of the State
family assistance grant, the grant payable to such State under section 403(a)(1) for—

(i) the fiscal year
immediately succeeding the year in which such 2-year period ends;
and

(ii) each succeeding
fiscal year in which the State does not demonstrate that such State
has implemented and maintained such policies and practices.

(B) Reduction of applicable penalty.—The
Secretary may reduce the amount of the reduction required under subparagraph
(A) based on the degree of noncompliance of the State.

(C) State not responsible for individual violations.—Fraudulent activity by any individual in an attempt to circumvent
the policies and practices required by section 408(a)(12) shall not trigger a State
penalty under subparagraph (A).

(1) In general.—The Secretary may not impose a penalty on a State under subsection
(a) with respect to a requirement if the Secretary determines that
the State has reasonable cause for failing to comply with the requirement.

(2) Exception.—Paragraph (1) of this subsection shall not apply to any penalty
under paragraph (6), (7), (8), (10), (12), or (13) of subsection (a) and, with respect to the penalty under
paragraph (2)(B) of subsection (a), shall only apply to the extent
the Secretary determines that the reasonable cause for failure to
comply with a requirement of that paragraph is as a result of a one-time,
unexpected event, such as a widespread data system failure or a natural
or man-made disaster.

(A) Notification
of violation.—Before imposing a penalty
against a State under subsection (a) with respect to a violation of
this part, the Secretary shall notify the State of the violation and
allow the State the opportunity to enter into a corrective compliance
plan in accordance with this subsection which outlines how the State
will correct or discontinue, as appropriate the violation and how
the State will insure continuing compliance with this part.

(B) 60-day
period to propose a corrective compliance plan.—During the 60-day period that begins on the date the State receives
a notice provided under subparagraph (A) with respect to a violation,
the State may submit to the Federal Government a corrective compliance
plan to correct or discontinue, as appropriate the violation.

(C) Consultation
about modifications.—During the 60-day
period that begins with the date the Secretary receives a corrective
compliance plan submitted by a State in accordance with subparagraph
(B), the Secretary may consult with the State on modifications to
the plan.

(D) Acceptance
of plan.—A corrective compliance plan
submitted by a State in accordance with subparagraph (B) is deemed
to be accepted by the Secretary if the Secretary does not accept or
reject the plan during 60-day period that begins on the date the plan
is submitted.

(2) Effect
of correcting or discontinuing violation.—The Secretary may not impose any penalty under subsection (a) with
respect to any violation covered by a State corrective compliance
plan accepted by the Secretary if the State corrects or discontinues,
as appropriate,[56] the violation pursuant to the plan.

(3) Effect
of failing to correct or discontinue violation.—The Secretary shall assess some or all of a penalty imposed
on a State under subsection (a) with respect to a violation if the
State does not, in a timely manner, correct or discontinue, as appropriate,
the violation pursuant to a State corrective compliance plan accepted
by the Secretary.

(4) Inapplicability
to certain penalties.—This subsection
shall not apply to the imposition of a penalty against a State under
paragraph (2)(B), (6), (7), (8), (10), (12), (13), or (16)[57] of subsection (a).

(1) In general.—In imposing the penalties described in subsection (a), the Secretary
shall not reduce any quarterly payment to a State by more than 25
percent.

(2) Carryforward
of unrecovered penalties.—To the extent
that paragraph (1) of this subsection prevents the Secretary from
recovering during a fiscal year the full amount of penalties imposed
on a State under subsection (a) of this section for a prior fiscal
year, the Secretary shall apply any remaining amount of such penalties
to the grant payable to the State under section 403(a)(1) for the immediately succeeding
fiscal year.

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